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The Pakistan Credit Rating Agency Limited
Press Release

Date
23-Jun-21

Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains the Entity Ratings of Master Green Energy Limited

Rating Type Entity
Current
(23-Jun-21)
Previous
(29-Jun-20)
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Developing Developing
Rating Watch Yes Yes

Master Group, pioneers of foam products, is setting up its second 50MW wind power plant in district Jamshoro, Sindh – Master Green Energy Limited. Master Green has been awarded a cost-plus tariffby NEPRA, with the energy payments to be received from CPPA-G backed by the sovereign guarantee of Government of Pakistan. The overall construction of the project is ~98% completed. Construction on the project is started in September 2019 and commercial operation date (COD) was expected to be achieved in November 2020. However, due to the outbreak of Covid19 construction activities were halted. The management now expects COD to be achieved by end-July 2021. Hydrochina International Engineering Company Limited & Hangzhou Huachen Electric Power Control Company are the EPC contractors, comfort is drawn that they have ~40 years of worldwide experience in wind power technology. The management has represented that in case of delay in achieving the COD, the EPC contractors will be liable to pay liquidated damages of $29000 per day backed by an irrevocable guarantee of 15% of the EPC cost. The construction contractor will be the O&M operator for two years after COD; it will provide the warranty bond (10% of EPC cost) in the form of an irrevocable bank guarantee for 24 months after COD. These bank guarantees provide additional cushion for the sustainable financial risk profile. Further, the company will maintain the Payment Service Reserve Account (PSRA), which will be filled by 6 months SBLCs and 3 months cash flows, in total providing coverage of nine months on its financial obligations till maturity. In addition, the project revenues and cash flows are exposed to wind risk, there is seasonal variation in the wind speed which affect the electricity generation, and ultimately cash flows may face seasonality. However, historical wind speeds provide comfort that Master Green would be able to generate enough cash flows to keep its financial risk manageable. Comfort is drawn from the group association, having strong financial backing and relevant experience in successfully commissioning and operating 52.80MW Wind Energy Power Plant (Master Wind Energy Ltd).
The Company has signed Energy Purchase Agreement ("EPA") with CPPA-G. As per the EPA, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes at applicable tariff rates. The Government of Pakistan has given payment guarantee against dues from CPPA-G. The Company has adequate insurance coverage to cover the risk of business interruptions, marine & erection etc. Furthermore, external factors such as any adverse changes in the regulatory framework or prolonged delay in achieving COD may impact the ratings. Upholding financial discipline is also a consideration.

About the Entity
Master Green Energy Limited, incorporated in May 2015, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The
50MW wind IPP is setting up in Jamshoro, Sindh. Mr. Rumman Arshad Dar is the CEO of the company. Mr. Dar has over twelve years of experience in the energy sector. Mr. Dar holds an MBA in Finance and has cleared the first two levels of the CFA program. The total estimated cost of the project is USD 64.64mln. Debt financing constitutes 80% of the project cost i.e. USD 51.71mln, which is financed from local and foreign financial institutions. The local facility has a tenor of ten years and the foreign facility has thirteen years with two years grace period, with quarterly repayments. Master Group has a long history spanning over 50 years. The flagship company Master Enterprises (Pvt.) Ltd established in the year 1963, deals in foam products. The Group gradually diversified in various industries with operations across textile, engineering, automobile, and retail sector. Master Group is successfully running an operational wind power plant; namely Master Wind Energy Limited located in Jhimpir, Sindh.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.